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Tuesday, 10 June 2008

Sri Lanka: First Global to capture 50% of Islamic investments base in 2009

By Sachini Weerawadena

With the Global Sukuk (Islamic Bonds) Market expected to reach USD 200 billion by 2010, First Global Investments hopes to develop a fully fledged Islamic Bank and the first ever Sri Lankan Sukuk is expected to capture 50% of the Islamic Investments base in 2009.

First Global Investments is currently working to secure mandates to raise USD 300 Million through issuance of Sukuk.

“With the large amount of available liquidity in the Middle East as long as oil prices keep rising, there is immense growth potential” said Founder and Managing Director of First Global Investments, Mr. Ikram Thowfeek adding that the objective is to bring FDI in to Sri Lanka through Islamic Banking. “This fact has to be taken very seriously by the government and the regulators” he said.

The Managing Director explained that considering the current state of the world financial market the impact of petrol prices is huge and said “lets have another channel to bring money back – oil money can be brought back to Sri Lanka and it is open to everyone, not confined to a particular ethnic group or religious community but for the entire mankind”. Mr. Thowfeek said “To ignore the will power to enter into this multi trillion dollar Islamic finance industry due to narrow minded thinking would be a mistake.”

Member of the Shariah Supervisory Board, Dr. Burhan Arbouna explained that Sukuk is a growing result of innovation of Islamic Banking, adding that in the Middle East “when they see they have lots of liquidity and no place to invest money in finance roots, the Sukuk is a tool created by Islamic Banking instruments based on assets to spread risk….for example, Bahrain has issued a number of Sukuks and the moment it is issued it is oversubscribed. In brief Sukuk is a liquidity management tool”.

Mr. Thowfeek while replying to a question raised, explained that the Sukuk to be issued will be up to Rs.1 Billion, open for review with a portfolio extending up to 3 years or 5 years, with returns of 18% to 20%. He further explained that building credibility is the key differentiation for any player providing Islamic financial services and commencing June 30, 2008 they hoped to raise capital up to USD 10 Million in two phases, USD 5 Million each.

First Global Investments Senior Vice President, Mr. Abdul Carder speaking at the Inaugural Investor Forum 2008 stated that First Global Investment is “purely to offer an alternative banking experience… according to Shariah Law”. “Momentum for Islamic Banking and finance is picking up in Sri Lanka and is estimated to be growing by 20% per annum.”

First Global Investments Chairman of the Shariah Board, Sheikh Esam Ishaq explained that Islamic banking is in accordance with the principles and feelings of Islam and said he was confident that “all will sooner rather than later witness alternatives of substantive rather than cosmetic differences of services, content and quality.”

He pointed out that it was “not confined to any culture, only encompassed day to day Islamic teachings and values in all of its facets” and added that these features would “fulfill and complement each other, the realm of finance was based on justice, mercy and kindness.”

Islamic Banking is largely untapped and “many are unaware of what it is about…growth potentials are enormous and opportunities are largely untapped due to lack of understanding” said Mr. Thowfeek. “The industry is growing, in the last 33 years only 20% of the market potential has been tapped in to – the entire 80% is open”, he said, adding that “unlike conventional banking, the entire transaction is looked at from moral and ethical boundaries to safeguard the very fabric of society – Islamic banks are not charitable institutions…”

Explaining why they had chosen the present time, Mr. Thowfeek explained that, “There can be ups and downs in any country, but we have to chip in to build – when has it been a good time for the last 15 years?” he questioned.

“All organizations are now picking up to have an arm of Islam banking……there is a demand and most conventional banks have been converted in the middle east” adding that “out of the top 10 global banks, 6 banks are involved to capitalize – for non-Muslims it makes commercial sense and the potential is very high.” He added that countries such as Thailand, London, Singapore, Hong Kong, India were all expanding Islamic finance institutions and therefore “no government, no regulator, no global or local financial institution can ignore the potential of Islamic banking”.